The fourth in the series of webinars organized by the UNCITRAL National Coordination Committee, India (UNCCI) with UNCITRAL Regional Centre for Asia and the Pacific ("UNCITRAL RCAP") and the Faculty of Law, Manav Rachna University was held on 6 June 2020. The discussion was on Cross Border Insolvency: Should India Adopt the UNCITRAL Model Law, 1997"
A panel of eminent speakers comprising of Judge Allan L Gropper (Former Bankruptcy Judge, Southern District of New York), Ms. Kate Lannan (Senior Legal Officer, UNCITRAL), Dr. T.K. Viswanathan (Chairman, Bankruptcy Law Reforms Committee, India), Mr. Sumant Batra (Managing Partner, Kesar Dass B & Associates) participated in the discussion. The discussion was moderated by Ms. Aparna Ravi (Partner, Samvad Partners) and Ms. Adwaita Sharma (Advocate, and Secretary, UNCCI). Mr. Gourab Banerji (Senior Advocate and Barrister, Vice Chairman of UNCCI, Overseas Associate at Essex Court Chambers, London) set the tone for the discussion while graciously introducing the theme, illustrious speakers, and the moderators. Introducing the session in the capacity of vice chair of UNCCI he mentioned that UNCCI's mandate is to capacity build in topics of interest to UNCITRAL and that its Chairman is Mr. Fali Nariman (Senior Advocate). The moot question, in his opinion, was whether India should adopt the UNCITRAL Model Law on Cross-Border Insolvency ("Model Law"). He noted that while the issue of cross-border insolvency hasn't come to the fore in India, it is an extremely relevant topic in today's global time. He cited the example of the Jet Airways insolvency case, which demonstrated the need for India to implement a robust cross-border insolvency framework. His introductory remark was followed by co-welcoming remarks by Ms. Athita Komindr (Head UNCITRAL RCAP) who mentioned that this webinar was UNCITRAL R CAP's first digital event on Cross Border Insolvency. She informed UNCITRAL R-CAP is UNCITRAL's only regional centre and was established in year 2012. Its aim is to promote progressive harmonization and modernization of International trade law in Asia Pacific region., in doing so and they assist governments and stakeholder and overcoming disparities in national legal system thereby facilitating cross border commerce and international trade. She also informed that in addition to Insolvency UNCITRAL's current work program covers access to justice by mediation and arbitration, judicial sale of ships, creating a legally enabling environment for Micro Small and Medium Sized Enterprises, E-Commerce and the Digital Economy. She further mentioned that the theme for the webinar is especially timely as Covid-19 continues to destruct global trade the need for harmonization has become more pressing than ever.
Ms. Aparna Ravi, moderator of the session, noted that the need for a cross-border insolvency framework cannot be ignored any longer, because the market does not wait for legislations to play catch up. She mentioned that currently Krishna Committee is set up by Government of India dealing rules and regulations to implement the cross border insolvency provisions into IBC and also to look into the Group Insolvency (It is noteworthy that Ms. Aparna is part of the said committee). She cited examples of Essar Steel, Videocon and Amtek Auto cases, apart from the Jet Airways example to assert that although, in the absence of any legislation, the judiciary is crafting a framework on a case by case basis but the same cannot be a substitute for adopting a comprehensive Insolvency legislation. Therefore it is imperative for India to adopt Cross Border insolvency legislation sooner rather than later.
Post this, Kate Lannan introduced the Model Law to the audience. She highlighted the situations which call for a cross-border insolvency regime (for example: when one insolvent debtor has assets or operations in more than one nation). She listed reasons such as increase in number of cases, delays, increased costs, cumbersome procedure, formal and conflicting court decisions, among others to demonstrate the benefits of a uniform cross-border insolvency framework. She stated that the primary objectives of the Model Law are fostering co-operation between courts of two nations, and promoting greater legal certainty to protect interest of creditors and other interested persons and specifically to protect and maximise the value of debtors assets where ever they are located etc. She clarified that the Model law does not attempt to unify substantive provisions of insolvency laws across nations but aims at respecting differences in the procedural laws of different nations. She clarified that Model Law is a unilateral law and it has to be enacted by State in order to be effected. She further noted that the Model Law had deliberately not introduced reciprocity as a criterion, because that would reduce global efficiency and reciprocity was not required for effective implementation of the Model Law.
Ms. Lannan commented on the incredible growth of the Model Law in the last couple of years, with 47 states having adopted it.Ms. Lannan clarified that the premise of the Model Law was to minimize formality and facilitate predictable and speedy outcomes. She summarized the essence of the Model Law in four elements; access, recognition, relief, and co-operation. She highlighted the need for a foreign member to have the right of direct access, subject to the local laws, and the importance of straight-forward conditions for recognition of a foreign proceeding. With regards to relief, she highlighted the importance of discretionary interim relief. She also emphasized the strong need for co-operation and co-ordination in the case of concurrent foreign and domestic proceedings.
Once Ms. Lannan concluded, Dr. T.K. Viswanathan addressed the audience. He briefly narrated the history of the groundwork leading to the codification of the Insolvency & Bankruptcy Code, 2016 ("IBC"). Dr. Viswanathan made a critical point, that even at the time of enacting the IBC, he and his team members were aware of the pressing need for providing a legal framework with respect to cross-border insolvency within the IBC however due to lack of the requisite ecosystem namely bankruptcy tribunal, a consolidated law on the subject, Resolution professionals and information Utilities etc, as a stop gap measures and interim solution two section namely 234 and section 235 were inserted in the IBC. He commented that bilateral treaties were not an efficient way of dealing with cross border insolvency, and noted that reciprocity as a requirement was not favored by him. He said that India's experience with reciprocal arrangements has not been a positive one, pointing to the Civil Procedure Code to demonstrate his point. Dr. Viswanathan, laid a great emphasis on one of the points made by Ms. Lannan, that for cross-border insolvency to be implemented effectively, there has to be greater co-operation and capacity building amongst Indian and foreign judges. Dr. Viswanathan ended his address on an optimistic note that he was confident that India would adopt the Model Law soon, stating that it was very encouraging that the IBC (unlike most other laws other than income tax and customs laws that had repercussions on revenue collection) was monitored so closely by the government.
Mr. Sumant Batra picked up from where Dr. Viswanathan left, providing a practitioner's perspective of the need to adopt the Model Law. He emphasized that India had capable and sophisticated lenders, judges and other stakeholders to effectively implement a cross-border insolvency regime. Accordingly, he made a strong case for the adoption of the Model Law by India. He was also a firm believer that India should not adopt the principle of Reciprocity and to substantiate his point he gave example of South Africa where adoption of Reciprocity has resulted in its insolvency law being redundant. He pointed to the difficulties in resolving cross border issues in the absence of a Model Law, citing various examples of the insolvency case where he himself had appeared. He discussed the insolvency of Amtek Auto that had assets in a very large number of jurisdictions, with parallel restructurings taking place in some of them. He also provided a detailed description of the Jet Airways cross-border insolvency case, which had involved proceedings in the Netherlands and India, and where he had represented one of the parties.
Mr. Batra commented on how the various stakeholders in Jet Airways, including the Indian resolution professional and the Dutch insolvency representative, had sat together and framed a protocol, that was largely based on the Model Law. The protocol answered important questions such as where the main proceedings should be, and how one would determine the rights and obligations of the parties. All parties agreed that sovereignty of India and Netherlands were to be respected, that the Indian proceedings should be the main one and that any asset sold out of Netherlands would be parked and utilizedat the end of the process to pay off costs and statutory dues. The administrator in Netherlands was allowed to be present at the meetings of the committee of creditors.Mr. Batra ended his description of the Jet Airways case, stating that it was a prime example to demonstrate that the market in India was ready for the Model Law. As a parting note, however, Mr. pBatra expressed his concern over the impact the Covid-19 pandemic has had on the Indian insolvency regime. In his opinion, it resembled a flight that had just taken off, but had begun to lose the air beneath its wings.
The final speaker was Judge Alan L Gropper. He commented that the USA had adopted the Model Law in 2005 through the enactment of Chapter 15 of the US Bankruptcy Code, and it had turned out to be an unqualified success. He noted that while the U.S. had cross border insolvency provisions prior to adoption of the Model Law, the Model Law set out a clear procedure, and provided a strong statutory basis for the judges to grant recognition, reliefs and cooperation. He also noted that the U.S. had adopted the Model Law without a reciprocity requirement, which had allowed it to grant recognition to foreign proceedings in countries that had not adopted the Model Law (including an Indian proceeding in one instance!). They still are firm believer of not adopting Principle of Reciprocity. He shared his practical experience as a bankruptcy judge in the US while citing various cases and also cited various provisions of the U.S. version of the Model Law chapter 15. He believed that the implementation of the Model Law in the United States had been very smooth and in a majority of cases did not involve contentious issues. He also noted that there was enough latitude under the Model Law to protect domestic creditors and their interests.
Once the speakers concluded, Ms. Adwaita Sharma conducted a brief Question and Answer (Q&A) session. An interesting question came up with respect to whether Alternate Dispute Resolution mechanisms would be helpful in cross-border insolvency, and two of the speakers nodded a yes to the question. The speakers also dismissed any concerns that a state would be conceding its sovereignty by adopting the Model Law. Overall, the session was highly productive, and concluded with a vote of thanks by Ms. Adwaita Sharma to the illustrious panel, Mr. Gourab Banerji, Ms. Athita Komindr, Ms. Anna Joubin Bret (Secretary UNCITAL), Mr. Ajay Thomas (Director, faculty of law, Manav Rachna University) and the Centre of Excellence on Alternative Dispute Resolution (CADR) at the Faculty of Law, Manav Rachna University, the moderators, the audience and the media partner Live Law and Mr. Rashid.